3 Methods of Consolidating Student Loans
Consolidating your student loans may be one way for you to save money on your interest payments and perhaps even pay off your student loans even faster. There are essentially three methods to go doing this. I want to highlight these methods below.
Consolidate with another student loan
The most obvious method is to consolidate your student loan with another student loan. If all your student loans are from one company, you must consolidate with that company. If you have loans from different companies, you can shop around. There are a couple of things to be aware of when you consolidate you student loans with another student loan.
1. Consolidation can affect your ability to get deferment on your student loans. Deferment is one method which you can delay your student loan payments. You can defer loans if you and your spouse are disabled, become unemployed, go back to school (resulting in more loans!), work in law enforcement or joining the peace corp. If you consolidate your loans, you may disqualify yourself from future deferments.
2. Some perkins loans has clause that allows you to cancel your loans under certain circumstances. Once again, consolidating your loans may result in you losing this option.
Consolidate with a HEL or HELOC
Consolidating your student loan with either a home equity loan or home equity line of credit is another viable alternative. The caveat to this method is that if you miss payments, you may risk losing your home to foreclosure. Whether you choose this method depends on the rate you are getting versus your existing student loan or your new consolidated student loan. You also have to decide whether to get a HEL or a HELOC. A HEL has a fixed interest rate whereas the HELOC has an adjustable rate. For the most parts, a HEL is preferred because you lock in a fixed rate.
Consolidate with a 0% APR Credit Card
Another alternative is to do the consolidate your student loan via a zero percent balance transfer credit card. You should look into this alternative if you do not own your home and/or you have a very good credit score. Apply for a 0% APR Credit Card, and you could potentially save a lot on interest for the introductory period. Do the math and see if this will work for you. At the moment, the best card for doing a balance transfer is the Platinum Consumer Card with Cash Back OR Travel Rewards from Advanta, which has a 0% introductory offer for 15 months (the longest offer period in the market today).
April 22nd, 2007 at 4:05 pm
[...] Student loans are very much in the news today, with investigations in more than one state being conducted into the loan process itself and the insider kickbacks at universities. The Student Loan Consolidation Lowdown blog has just run two blog carnivals rounding up posts on student loans from the Frugalist’s good clean fun of 27 Fun Ways to Destroy Your Old Credit Card to more serious fare like Mr. Credit Card’s 3 Methods of Consolidating Student Loans, Student Loan Consolidation Lowdown carnival brings together a host of useful and entertaining blog posts for students looking to manage their budgets while also planning for the future all the way into their retirement years, since after all retirement planning begins today. For the student either making his or her way through college and looking to avoid the credit card debt into which too many students stumble into, using credit cards specifically provided to students that are meant to entrap them into high interest rates and resulting tens of thousands of dollars in debt or the graduating student preparing to cope with both student loans and an entry level place in the workplace, this is a useful blog to plan for the future and deal with the fiscal choices of your past. [...]
June 6th, 2007 at 8:35 pm
[...] Mr Credit Card presents 3 Methods of Consolidating Student Loans posted at Ask Mr Credit Card’s Blog. Consolidating your student loans may be one way for you to save money on your interest payments and perhaps even pay off your student loans even faster. There are essentially three methods to go doing this. [...]
June 28th, 2007 at 11:57 am
[...] Mr Credit Card presents 3 Methods of Consolidating Student Loans posted at Ask Mr Credit Card’s Blog. Consolidating your student loans may be one way for you to save money on your interest payments and perhaps even pay off your student loans even faster. There are essentially three methods to go doing that. [...]
January 21st, 2008 at 12:27 am
You also need to bear in mind that Consolidation Loans may not always be the best option for certain individuals. If you cant afford to make repayments or if you have a bad credit history then some lenders will charge you even more on interest rates, putting you further in debt in the long run.
Taking out a consolidation loan in certain situations can be a great help, if, and only if you can control your spending and if, and only if, you get rid of all that ‘plastic’ that may have got you into debt in the first place.